Gold prices increased for the third consecutive day, reaching a one-week high on Wednesday. Investors turned to safe-haven assets amid the escalating Russia-Ukraine conflict and a declining dollar.
On Wednesday, bullion approached the resistance level of US$2,640-2,650 per ounce as the dollar’s recent rally paused, making gold more appealing to buyers holding other currencies.
According to local trader MTS Gold, the SPDR Gold Trust, the largest gold fund in the world, purchased 0.58 tonnes of gold on Tuesday, raising its total holdings to 872.2 tonnes.
The global spotlight is on Russia, where President Vladimir Putin has lowered the threshold for a nuclear response to various conventional attacks. This shift follows reports that Washington, DC has permitted Ukraine to use US-made weapons to launch strikes deep into Russian territory.
In Thailand, gold was trading at 43,100 baht per baht weight by midday, as reported by the Gold Traders Association. MTS noted that domestic gold prices had hit a low of 42,100 baht before rebounding to around 43,000 baht.
Hua Seng Heng Gold Futures indicated that while the global gold price is expected to recover, the upside may be limited as investors have already factored in geopolitical risks into their pricing.
They suggested that if no additional factors support the price, it may stabilize at its current level. Hua Seng Heng forecasts gold to face resistance at $2,640-2,660 per ounce, with support at $2,610-2,590. In Thailand, the resistance is estimated at 43,200-43,400 baht per baht weight, while support is at 42,750-42,550 baht.
The baht has slightly appreciated from 34.75 baht to the dollar to 34.53 on Wednesday, which may apply pressure to domestic gold prices. However, domestic prices are recovering in line with global gold trends, according to Hua Seng Heng’s research note.
Meanwhile, several Federal Reserve officials are expected to provide insights into the potential trajectory for US rate cuts. Traders are estimating a 58.9% probability of a 25-basis-point cut in December. The market is adjusting its forecasts for the Fed’s cuts in the coming year, as inflation continues to be a growing concern. Higher interest rates typically diminish the attractiveness of gold.
